New Challenges to the Export Oriented Growth Model

Song Hong

Chapter 2 in Moving Toward A New Development Model For East Asia-The Role of Domestic Policy and Regional Cooperation, pp 27-54 from Economic Research Institute for ASEAN and East Asia (ERIA)

Abstract: The export-oriented strategy played a crucial role for the successful development of East Asian economies after the World War II. They first exported low-technology manufactured goods, then gradually upgraded and transformed their export goods packages and finally caught up with the developed countries. Export oriented strategy in East Asia has been based on a series of internal and external conditions. Those conditions includes an open international environment, the existence of a certain size of external market, a stable supply of raw materials, as well as good and convenient navigation, and some internal conditions. Global financial crisis badly changed some of these conditions. For example, the external market was very unstable and was growing very slow; after the financial crisis, international raw material and energy prices experienced sharp volatility, which caused great challenges to the countries and enterprises seeking to implement an export oriented strategy. However, after the financial crisis the changes in international and domestic environments did not change the nature and trends of globalization, only temporarily slowed the pace of this process. East Asian countries can therefore continue their export oriented strategy, but should be prepared for slower progress than in past decades. Given the unstable and uncertain external markets, East Asia's export strategy and economic development models must find alternative markets. One of these is the intraregional market. The potential intraregional market in East Asia is huge. In 2011, East Asian intraregional trade was 52.62% of its total exports, which was very low compared to the EU (66.75%). If for example, East Asian economies were to catch up with the EU in terms of intraregional trade, then each year there would be more than 1 trillion US dollars new demand from this region alone. Unfortunately, to tap this potential, there is a long way to go for the East Asian economies.

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